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Inside the murky world of shylocks

By - | Apr 5th 2013 | 6 min read

By Nairobian Team

In 2009, Zipporah Mathara, a retired civil servant and mother of four, needed some quick money. Her relatives and friends were of no help and her bank said it could take at least a week to clear her loan application.

It was then that she approached Ndung’u Maina, a moneylender, with the promise that she would repay within a few months. But Zipporah’s financial woes deepened and she defaulted on the payments. Then one day Ndung’u appeared at her door accompanied with policemen. She was arrested and subsequently taken to court.

On March 24, 2010 Zipporah was charged under the Bankruptcy Act. She was committed to civil jail and taken to the Murang’a Prison for failure to pay the debt of Sh339,855. That was when city lawyer Irungu Kang’ata (now Kiharu MP) was requested to represent the debtor. 

“She had signed a contract. There was nothing much to be done,” Kang’ata told The Nairobian this week.

According to the law, a shylock should have his pound of flesh. However, if the courts are convinced that the shylocks are oppressive and greedy, a borrower can be left off the hook. By the time Zipporah’s case was over, Kang’ata had secured her release.


In a landmark ruling, High Court judge Martha Koome said civil jail violates the rights of loan defaulters. Justice Koome declared unconstitutional a section of the law that commits a debtor to civil jail as it was against the 1972 International Covenant on Civil and Political Rights, which on Article 11 says that no-one shall be imprisoned merely on the ground of inability to fulfill a contractual obligation.

Zipporah’s experience is an oddity in that the moneylender went to court and it had a happy ending. In many instances, the relationship between shylocks and their clients is strewn with heart-wrenching stories of intimidation, loss of property and opaque contracts.   

Sample the case of Kayole resident Dennis Gituma. Last year, he used his Play Station 2 to get a loan from a shylock in the estate. He was to use the cash to enjoy a drink that evening.

The deal was that he was to repay the Sh1,000 he was given plus Sh300 interest the following Monday. That Monday he called the loan shark to request for an extension of the repayment, a plea that was promptly declined with a warning that the game system would be sold at the end of that day if the loan repayment plus interest is not received by 6pm.

The loan shark asked Dennis to check on the receipt for the terms and conditions. Dennis was bound by the fine print on the receipt that he had signed, and the loan shark had essentially assumed ownership of the game system worth about Sh8,000 at close of business on Monday.

Dennis, who says he has in the past lost mobile phones to other loan sharks, regrets having approached the shylock  and particularly taking the Sh1,000 to have a drink.

His situation is played out thousands of time everyday in Nairobi where individuals, lured by the ease of getting expensive credit from loan sharks, lose millions worth of their property to the ruthless informal lenders. There are no endless questions and paperwork to secure the financial boost — all one needs is any form of security, ranging from electronics to your car logbook, and the transaction can be complete in a few minutes. And unlike Denis, many are too embarrassed to tell their stories.

Pound of flesh

Yet shylocks are not a new fixture. In William Shakespeare’s play, The Merchant of Venice, the ruthless greed of a Jewish moneylender, Shylock, is beyond belief. He famously demands as pound of flesh from Antonio, his debtor, as per the law, despite offers to repay the money. But Shylock is beaten at his own game when he is told to cut an exact pound of flesh at a go without spilling any blood…  

Today’s Shylocks have mutated to gain. Some even identify themselves as ‘microfinance’ institutions to lure their customers with the promise of instant cash free of the rigorous procedures that characterize bank lending.

Shylocks are cunning lenders. They work around the clock to ensure that the borrower defaults so that they ‘justify’ the sale of the security provided.

Kenya has no express law against being a shylock. The practice itself is so vague and benefits from poor regulation.

“You can say that you are lending money to a friend or relative,” lawyer Kang’ata says. “Besides, those who sign a contract with a moneylender are legally bound by it.”

Shylocks operate like unregulated finance companies and they rely on the sanctity of contract law to keep in business. Their contracts are poorly worded, ambiguous and skewed in such a way as to be misunderstood or misinterpreted by borrowers.

Ann (full name withheld), a cashier who worked at ‘microfinance institution’ in Westlands, took The Nairobian through the tricks shylocks use. She says the beginning of most clients problems is the excitement and anxiety of getting the quick cash without taking time to read the entire contract.

“We don’t give them a chance to read the contract and rarely do they bother to try and read it. This is where all hell starts,” she says.

In their rush, says Ann, one of the clauses most clients miss is the 12pm rule, which means that on the day of repayment one must clear the debt by midday: “A fine of an agreed amount is charged per minute for any delay of payment past 12pm. For example, a five-minute delay could attract Sh120. This goes on and on.”

Repayments through money transfer services like M-Pesa are also exploited by shylocks. Clients who do not save the SMS reply detailing the transaction, and who may be too ignorant to realise they can get a statement from the service provider, are usually forced to make double payments when the shylocks feign ignorance.

As we found out too, shylocks prefer clients who look for huge loans. Not because of their huge returns, but the high rate of potential default.

“They are normally very happy when someone comes to ask for a huge loan, usually over Sh80,000. They give out the loan in the hope that you will default so they can take your property and sell it at huge profits,” says Ann.

Should one refuse to pay up the debt, shylocks employ bouncers—some of who operate like hardcore criminals.

Peter (surname withheld) also worked for an ‘investments company’ in the city centre for a year before he quit. His job was to pick valuables from loan defaulters — either by force or through negotiation.

Peter was recruited from Umoja and was paid Sh3,000 per successful mission. He says shylock’s orders were for them to pick up anything with a value of more than Sh1,000 from the house and load them to their trucks. To do this effectively, they had to go to the defaulter’s house very early in the morning, usually between 4am and 6am.

Ann helps to shed some light on this: “The goods possessed are worth more than the loan owed. They sell the properties at a profit. The money owed to the business is returned while the profit is taken up by the bosses. No questions asked.”

Corrupt police

Peter says his job was traumatising: “It is not that easy watching a woman who is old enough to be your mother losing all her belongings at once. We had to take shots of hard spirits very early in the morning before making our way to the defaulter’s home. It is not a job for the faint-hearted,” says Peter.

But it is not always smooth sailing for the loan sharks, with some defaulters resisting violently or seeking legal remedy. Going to court, says Ann, is a shylock’s worst nightmare because of the time and costs involved.

“Eventually the court’s order is usually for the defaulter to pay back in installments, which are too slow and unprofitable for the loan sharks,” she says.

To reduce some of these problems, claims Anne, shylocks have corrupt police officers on their payroll. This means they can operate freely without fear of arrest.

Notwithstanding, shylocks remain a reality in the city’s financial system — be they in the Central Business District or residential estates. Even offices have their own shylocks. 

-By Kevin Oguoko, Moses Michira and Nyambega Gisesa



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